Inflation - that's so last year

The smaller-than-expected drop in headline inflation does not mean Britain will avoid its first bout of deflation for decades, but it does suggest the fall in the pound may be slightly delaying it. CPI fell back to 4.1% last month, from 4.5% the month before. Normally that would count as a big move but the drop was smaller than the City expected - it had forecast 3.9%.

Whether that is because the City is no good at forecasting is a moot point. The ONS said that while petrol prices collapsed 8% in one month, the CPI was held up by rising food prices, particularly fruit which is mainly imported at this time of year and priced in dollars.

But the old retail price index plunged to just 3%, the lowest since May 2006. It was down from 4.2% the month before, showing that the widest measure of inflation, which includes collapsing house prices, is tumbling.

And food price inflation won't last - agricultural product prices are already down. Add in the VAT cut, which will hit the numbers for this month, and continued petrol falls and you have a recipe for more dramatic drops in inflation.

Ernst & Young reported yesterday that retailers are offering record discounts across the board to try to entice us to part company with our cash - hardly a sign of inflation.

In fact, no one at the Treasury or Bank of England is remotely concerned about inflation now. Plenty of forecasters think both measures of inflation, CPI and RPI, could be in negative territory throughout much of 2009.

The Bank has already cut rates to 2% from 5% and is likely to cut them again next month. Rates are likely to go as low as 1%, or even zero, over the coming months. That's all you need to know.

Each-way winner

Anurag Dikshit's decision to plead guilty to a charge of wire fraud in the US, relating to PartyGaming's once market-leading online poker business, will be little compensation for those UK investors who had their fingers badly burned after the company floated in 2005.

For those who do not recall, PartyGaming's float was nothing to do with raising cash to expand, it was designed purely to allow its founders - Dikshit and fellow Indian computer engineer Vikrant Bhargava, together with American former porn entrepreneur Ruth Parasol and her husband, Russ DeLeon - to cash in a portion of their chips. They hit the jackpot. The float, and shares sold after that, netted them well north of £1.2bn - not including dividends.

At one point the value of the company nudged £7bn. Little more than a year after the float, the US decided online gambling was illegal. This was not exactly a surprise: the PartyGaming flotation prospectus had pointed out that the department of justice regarded online gambling as illegal. Since then the entire business, and its executives, have been operating under a cloud. The market capitalisation of PartyGaming is now a relatively paltry £700m.

So now Dikshit has agreed to fold, and hand over $300m (£200m). In return he hopes to avoid a spell in the penitentiary. He remains, however, about £300m up. Would that investors had been so lucky. Those burned by PartyGaming are not just punters who bought shares, but those in pension funds and tracker funds (because for a while it was a FTSE 100 company) managed by 150 British institutional investors who decided to ignore the legal warnings - including some of the most highly rated investment professionals such as Fidelity's Anthony Bolton.

Still, Dikshit's offer to pay up was good news for PartyGaming's shares - and those of rival 888 - because it could be a sign that the DoJ cloud hanging over the company might not be as threatening as feared. For Dikshit, who still has a 27% stake, the share price rise meant that £40m, or 20% of his $300m penalty, was recouped immediately.

Gin without tonic

Grim. Grim. Grim. With the exception of a few grocers with pristine price credentials, there is just no good news from any consumer-facing business.

Fresh from three three-day 25%-off sales in the past month Debenhams is now doing a last-throw-of-the-dice five-day sale with up to 50% off. Long term, it has to be a bad strategy. Why would anyone ever buy anything full price from Debenhams again? What do they do for the January sales? Give it away?

The bigger the ticket the more grave the situation. Take Comet: first-half sales down 12%, margins down 100 basis points due to savage discounting and a £10m profit reverses to a £8m loss.

There was a major profits warning from Carpetright, a 26% slump in new car sales last month and news of 275 job losses at Fairline, gin palace builder to the newly strapped-for-cash investment banking class. Every cloud ...julia.finch@guardian.co.uk